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IAA Urges SEC to Remain Primary Regulator of Advisors

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As the Securities and Exchange Commission (SEC) conducts its study required under Section 914 of Dodd-Frank of whether it should designate a self-regulatory organization (SRO) to oversee advisors, the Investment Adviser Association (IAA) urged the SEC in a Tuesday letter to “maintain its role as the primary and direct regulator of the advisory industry.”

Section 914 of Dodd-Frank requires the SEC to “review and analyze the need for enhanced examination and enforcement resources for investment advisers.” Dodd-Frank specifically directs the SEC to consider the extent to which having Congress authorize the SEC to designate one or more self-regulatory organizations to augment the SEC’s efforts in overseeing investment advisors would improve the frequency of examinations, notes David Tittsworth, IAA’s executive director.

The IAA has been a vocal opponent of having the Financial Industry Regulatory Authority (FINRA) be designated an SRO for advisors — a threat that’s still very real as FINRA continues to lobby for this position. The SEC is required to submit its report under Section 914, including recommendations for regulatory and legislative action, by Jan. 21, 2011 — the same six-month timeframe as the Section 913 study and report on fiduciary duty.

Tittsworth noted in the letter to the SEC that “While the introduction of a self-regulatory organization might result in a greater number of adviser examinations, we are not persuaded that it would result in overall improvements to the effectiveness of the current examination regime or enhanced investor protection.”